Cigarettes overpriced, says UK government

It is not enough for some bureaucrats just to loaf about, coming in late, going home early, taking long lunches, and generally living the life of medieval lords and ladies. No, a few of them actually try to find work to do, usually to please their political masters, to make it look as if politicians and civil servants are in some way useful. So, in a bid to justify their taxpayer-funded index-linked pensions, the boys and girls in Britain’s Office of Fair Trading (OFT) have decided to launch an investigation into an alleged price-fixing scam amongst Britain’s three largest cigarette companies. Is there any evidence? If there is, it’s probably been written on the back of a fag packet, after some boozy Friday in Whitehall.

Did somebody forget to tell the OFT that of every £4 pounds spent on cigarettes, in the UK, £3 pounds and twenty pence goes to big fat Gordon, in the Treasury, to waste on Cabinet Office taxi fares, in the biggest monopolistic price-fixing scam of all? So the cigarette companies, those unacceptable faces of capitalism, whose golden goose profits prop up Her Majesty’s Government with billions in tax every year, are apparently manufacturing the cigarettes, getting them to the consumer, providing the retailers with a decent handling fee, and still conniving with the few pennies left to ‘rip off’ the consumer? No doubt they are also threatening rival cigarette manufacturers with menaces, if they try to ‘butt’ into their market. Maybe they have hired a few ex-Inland Revenue bottom inspectors, for the task?

However, have I got news for you, oh wondrous denizens of the OFT. Do not dig too hard and kill your golden goose. If you do, it might become a bit too obvious why it is we do live in ‘rip off’ Britain. The people ripping everyone else off are the government, and all of its agents, including the over-salaried nose-pokers in the OFT. Take another flexi-day off, for pity’s sake. Just let the rest of us get on with our lives.

December 15th, 2003 |

18 comments to Cigarettes overpriced, says UK government

I don’t know how legal or practical this might be, but do any of your retailers over there list the price of their products broken down by actual cost plus taxes (I don’t know if any do here in the States, but I wish they would)? It might be interesting to get the reactions of consumers if they pick up their next packet of cigarettes and see how much of their money is going to the government.

Many of us in the upstream (oil finding and producing) end of the US oil and gas business have wished for years that the oil companies would put a price breakdown on the gasoline pumps where angry people could read it as they pumped their gas.

For some, unfathomable to me, reason this has never happened. I have always assumed it was the result of the craven tendency of companies with their business and assets at the governments’ (State AND Federal) tender mercies.

“Competition” policy (competition only being a good thing in the private sector, of course) is starting to resemble an elaborately bureaucratic modern version of Morton’s fork.

Prices vary: the consumer is being gouged by those wicked capitalists, so we must intervene.
Prices are much the same: they are being fixed, so we must intervene.

Persumably one can tell a properly competitive market (in which prices for similar goods are much the same) from a rigged one (in which prices for similar goods are much the same), because in a properly competitive market everybody charges the price the bureacrats tell them they are allowed to, and fills in lots of forms to prove it.

‘Competition’ policy appears to be a way for governments to punish anyone who makes a buck without the state’s permission. If you have a state protected income via banking, patent law or some kind of state subsidy, then that’s okay. As long as we all know who is boss.

Ted – tobacco smuggling into Britain is a huge business and the more tax the stupid chancellor piles on cigarettes, the bigger it becomes.

It seems that in their eagerness to develop a “common market” as it was in those days, they forgot that people would be able to buy items overseas without paying duty. There are people who make a very nice living going back and forth across the Channel in vans and bringing back thousands of cigarettes at a time “for personall use; I’m a heavy smoker”.

At the same time, there are Frenchmen making a very nice living driving down to Spain and coming back with even cheaper, lower-taxed, cigarettes, which they sell in France. As we know, governments are very, very stupid.

The interesting things about this story is not about this story! I first heard about government concerns on the midday Cannel 4 news on Monday. The same news broadcast, though, also had the story about the resolution of talks regarding a new runway at… was it Heathrow?

Any way, the government had decided that it wouldn’t build a new runway, so the story went, but local protesters couldn’t rest easy because the government decided that it would permit the air port to have more planes using its existing runways.

So on one hand we had a story about how evil business men were doing their utmost to “fix” prices, and on the other we were learning that it is actually the government that decides how many planes can fly at a time.

The cigarette scam, we know, would be unsustainable in a free-market. The high prices would attract competitors who would either have to be let into the cartel, there by diminishing member’s returns, or they would have to be competed against, thereby encouraging a perfectly good and beneficial price war.

But this assumes that competitors have free entry to the industry. The story about the airport made it plain that the government restricts how many airplanes can use runways at a time, and so control’s the supply of airplanes. Nobody without government permission can launch a plane off one of the runways, and nobody without government permission can build a new runway. The result is that monopolistic pricing is made possible through government action.

It is a scandal that VAT, too, is incorporated into shelf prices and is therefore effectively invisible. I would love to see actual price and tax split on cigarettes as well as alcohol, but also on any VAT-able goods. The typical tax on bottle of wine is £1.15 (the cheapest bottles of wine cost about £2-3 total) and the typical tax on a pint of beer is 27p.

A lot of you people seem to be intent on blaming the ‘wicked capitalists’. Forgive my ignorance, but what exact proof is there that prices are rigged in the tobacco industry? Have any anti competitive prices scandals or cartels been proved in the last 5 years?

A lot of you people seem to be intent on blaming the ‘wicked capitalists’. Forgive my ignorance, but what exact proof is there that prices are rigged in the tobacco industry? Have any anti competitive prices scandals or cartels been proved in the last 5 years?

Cigarette tax may seem high, but the cost to the NHS in the UK of treating smokers is well over £3 Billion every year (and rising dramatically). There are also the unseen costs – cleaning up after smokers, redecoration of premises discoloured by smoke, days off work through illness related to smoking, passive smoking, effects on families of people ill etc. It is also projected that over the next 100 years 1 billion people worldwide will die of smoking related illness, compered to 100 million people over the last 100 years. Therefore the cost to the NHS will increase by a minimum of 10x. Tobacco farmers are also exploited and receive little for their crop, if they could grow food instead it would also help their economies to improve. I’m not a blatant anti-smoker but when you see the figures the tax are justified – and should be higher!

If the government is footing the bill for health care, they should be able to charge additional costs to those who raise the bill. The US does not provide health care for the people it owns, there is no justification for the higher gas and tobaco taxes.

if 100 million people die of so called smoking related illnesses, what does everyone else die of? non smokers seem to think they live forever. if cigarettes are £7 per 200 in the cheapest eu country and £51 in rip off britain its time the eu stepped in and reduced prices in the uk. In the 40s and 50s most people smoked . on buses trains planes. in cinemas shops etc yet the number of pensioners is rising each year. Its a miracle they should all be dead from the (illusion) that is smoking kills and passive smoking kills. Non smokers who support high cigarette prices will shortly see higher alcohol prices and higher burger prices , its the nanny state gone mad. but if you do live longer you will freeze to death coz you wont get a decent pension to pay your gas bill.

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